Launch of the 'Virtual Asset Crime Joint Investigation Unit'... Composed of 30 Members from Prosecution and Financial Supervisory Service

Increase in Virtual Crimes but Insufficient User Protection
Plan for Rapid Investigation through Cooperation with Related Agencies

The 'Joint Investigation Unit for Virtual Asset Crimes,' composed of personnel from seven investigative and financial authorities including the prosecution and the Financial Supervisory Service, will be established at the Seoul Southern District Prosecutors' Office, which specializes in financial and securities crimes. This aims to eliminate barriers among experts related to virtual asset crimes and enable faster investigations.

The Joint Investigation Unit for Virtual Asset Crimes (Head Lee Jeong-ryeol, Joint Unit) held its inauguration ceremony on the afternoon of the 26th at the Seoul Southern District Prosecutors' Office. The unit consists of about 30 investigative and research experts from the prosecution, Financial Supervisory Service, Financial Intelligence Unit (FIU), National Tax Service, Customs Service, Korea Deposit Insurance Corporation, and Korea Exchange.

Seoul Southern District Prosecutors' Office. [Photo by Yonhap News]

Filling the User Protection Gap through the Launch of the Joint Unit

The launch of the Joint Unit is driven by the rapid growth of virtual assets and the resulting gap in user protection, the proliferation of poor-quality and defective virtual assets and their delisting, and the emergence and increase of new types of crimes related to virtual assets.

As of the second half of last year, the number of virtual asset market users in South Korea reached approximately 6.27 million. Virtual assets are traded not only by the core 20s and 30s age groups but across all age groups. However, regulations prohibiting unfair practices related to the issuance, listing, and distribution of virtual assets have not yet been legislated. Although the 'Act on the Protection of Virtual Asset Users' was enacted, it is expected to take a considerable amount of time to establish protective laws through subsequent legislation and a second phase of legislative efforts.

Status of Virtual Asset Trading Suspension (Delisting) and Designation as Investment Caution Items.

Between 2021 and 2022, 1,053 virtual assets were delisted, and 1,010 were designated as investment caution items, indicating increasing investment risks. Among the 625 virtual assets circulated domestically last year, 389 (62.3%) were singly listed, and 132 had a market capitalization of less than 100 million KRW, suggesting many virtual assets are suspected to be poor-quality or defective. Singly listed virtual assets can only be traded on the exchange where they are listed, and once delisted, they cannot be traded on other exchanges.

Additionally, various new types of crimes such as backdoor listings through overseas paper companies, price manipulation, illegal foreign exchange transactions, and multi-level marketing of coins have emerged. Suspicious transactions suspected of criminal activity throughout the virtual asset process have also been increasing annually. The average monthly number of suspicious virtual asset transactions reported to the FIU surged more than 14 times from 66 cases in 2021 to 943 cases this year. The scale of criminal damage has exceeded 5.3 trillion KRW over the past five years, rapidly increasing from 467.4 billion KRW in 2017 to 1.0192 trillion KRW last year.

Formation of Investigation and Analysis Teams... Efforts to Recover Criminal Proceeds

Structure of the Joint Investigation Unit for Virtual Asset Crimes.

The Joint Unit plans to select and focus investigations and prosecutions on delisted virtual assets, investment caution items, and those with high price volatility. It will collect and investigate data related to virtual assets that were delisted within a short period, listing fraud related to virtual assets designated as investment caution items, and unfair trading activities occurring within the virtual asset market. If specific criminal suspicions are identified, investigations will promptly commence.

The Joint Unit is composed of a virtual asset investigation and analysis team and an investigation team. The investigation and analysis team consists of experts from related agencies such as the National Tax Service, Customs Service, and FIU. They analyze virtual asset issuers and distributors or detect abnormal transactions, investigate defective or poor-quality coins, and then forward findings to the investigation team. The investigation team is composed of prosecutors and prosecution investigators experienced in virtual asset-related crime investigations, responsible for investigation, prosecution, maintaining public prosecution, recovering criminal proceeds, and recommending improvements to virtual asset-related systems.

In addition, the Joint Unit collaborates with the Seoul Southern District Prosecutors' Office's dedicated asset recovery prosecutors to proceed with seizure and confiscation preservation from the early stages of investigation. After the judgment is finalized, the preserved assets will be forcibly executed to recover criminal proceeds. A Joint Unit official stated, "Through the launch of this Joint Unit, it will be possible to respond swiftly and strictly to virtual asset crimes by combining the expertise and know-how of government agencies, which had been in a blind spot for investor protection due to legislative and institutional shortcomings, with the prosecution's investigative capabilities."

This content was produced with the assistance of AI translation services.